Q3 FY16 revision helped GDP, note ban impact at 1%: Analysts

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26 Aug, 2025 12:21

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Even though a 7 percent headline growth number for Q3 suggests resilience in the economy despite note ban, analysts today said a sharp cut in the year ago's data helped achieve it, while demonetisation led to an impact of over 1 percentage point on GDP expansion.

"The steep downward revision of Q3 FY16 has in turn led to higher growth in Q3 FY17, thus masking the impact of demonetisation in the Q3 figures," the economic research department of country's largest lender SBI said in a note.

It said numbers in a slew of activities like construction being at a 7-quarter and finance at record low are "some of the numbers beneath the surface however signify the impact of demonetisation".

The note said looking at the gross value added (GVA) growth is a better gauge and estimate growth to slow down to 6.7 percent in FY17 as against the previous fiscal's 7.8 percent under the method.

Foreign brokerage Bank of America Merill Lynch said the decision to ban over 85 percent of the outstanding currency by abolishing Rs 500 and Rs 1,000 notes led to an impact of over 1 percentage point on growth.

"Although December quarter (Gross Value Added) growth, at 6.6 percent, surprised on the upside (as against an estimate of 6 percent), it is still lower than the 7.5-8 percent projected by us in 2HFY17 before the demonetisation shock...demonetisation hit growth by over 1 percent," it said.

Private sector lender IDFC Bank said the services sector has been hit the hardest by the demonetisation exercise, but the economy was able to show a 6.6 growth on GVA basis due to an uptick in agricultural activity and industrial sector.